US, China haggle over toughest issues in trade war talks

Reuters reported exclusively on Wednesday that the two sides are starting to sketch out an agreement on structural issues, drafting language for six memorandums of understanding on proposed Chinese reforms.

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If the two sides fail to reach an agreement by March 1, US tariffs on 0 billion worth of Chinese imports are set to rise to 25 per cent from 10 per cent. (Image for representational purpose)

Top US and Chinese trade negotiators haggled on Thursday over the details of a set of agreements aimed at ending their trade war, just one week before a Washington-imposed deadline for a deal expires and triggers higher US tariffs.

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Reuters reported exclusively on Wednesday that the two sides are starting to sketch out an agreement on structural issues, drafting language for six memorandums of understanding on proposed Chinese reforms.

If the two sides fail to reach an agreement by March 1, US tariffs on $200 billion worth of Chinese imports are set to rise to 25 per cent from 10 per cent. Tit-for-tat tariffs between the world’s two largest economic powers have disrupted international trade and slowed the global economy since the trade war started seven months ago.

Negotiators have struggled this week to overcome differences on specific language to address tough US demands for structural changes in China’s economy, two sources familiar with the talks said. The issues include an enforcement mechanism to ensure that China complies with any agreements.

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“It’s not surprising that this week has been more challenging,” said an industry source familiar with the talks. “Once you move from putting together outlines to filling out the details, that is where things would naturally become more challenging.”

Chinese officials did not answer questions as they left the US Trade Representative’s office on Thursday evening after more than nine hours of talks on Thursday.

The discussions began with a photo opportunity where US Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He faced each other silently across a table in the Eisenhower Executive Office Building next door to the White House.

US President Donald Trump will meet with Liu at the Oval Office on Friday, the White House said late on Thursday. The two also met at the end of talks during Liu’s last visit to Washington in late January.

The two sides remain far apart on demands by Trump’s administration for China to end practices on those issues that led Trump to start levying duties on Chinese imports in the first place.

Chinese President Xi Jinping would need to undertake difficult structural economic reforms to meet US demands. The United States is offering no real concessions in return, other than to remove the tariff barriers Trump has imposed to force change from China.

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One of Trump’s demands that is easier to fix for Beijing is to reduce the trade imbalance between the two nations. The US trade deficit with China reached a record $382 billion through the first 11 months of 2018.

The two sides have reached consensus on how to alleviate the trade imbalances, several Chinese government sources said. Washington and Beijing are looking at a 10-item list for that, including additional Chinese purchases of agricultural produce, energy and goods such as semiconductors.

The United States could quickly recover its lost agricultural markets in China if a deal is struck, he said.

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Perdue has overseen $12 billion in federal aid to US farmers for losses they have sustained because of the trade war. China had all but halted purchases of US soybeans, which were the single biggest US agricultural export, worth around $12 billion in 2017.